E*Trade ATM embrace fraught with opportunity, risk
By Alan Alper, GomezWire ZDII
zdii.com
E*Trade's (Nasdaq: EGRP) transition from a place to
"e-trade" to a place to "e-invest" took another step
forward this week with its agreement to acquire Card
Capture Services (CCS), a major independent automated
teller machines (ATM) network operator.
The deal, which is expected to be wrapped up next
quarter, will give E*Trade the physical presence it's
long craved: 8,500 ATMs located nationwide (and
throughout North America) that generate over 3.1
million transactions per month and will eventually
deliver a mix of banking and brokerage services -- and
then some -- if you read between the lines. Terms of
the deal, which follow closely on the heels of
E*Trade's acquisition of Telebank, weren't disclosed.
Here's Gomez's first blush assessment of the deal:
High-tech but is it high-touch? CCS' Web-enabled ATMs
will give E*Trade customers the ability to do their
banking and eventually brokerage outside the home and
office (the firm plans to phase in brokerage into
Telebank's banking offerings over the next six
months).
And while that may appeal to on-the-go 21st Century
investors whose accounts need constant attention, the
real question is how much more soothing the experience
will be for consumers who require a good deal of hand
holding or frustrated by long queues? ATMs are not
known for their sensitive treatment of questioning
customers.
E*Trade counters by saying CCS' ATMs can be easily
outfitted with interactive edu-content, even videos
(which excel at up-selling and cross-selling, but
offer limited issue resolution facilities). And while
E*Trade's been rumored to be considering establishing
some sort of physical branch network, don't expect to
see much activity on this front in the short-term.
Though the firm recently disclosed plans to open a
facility in mid-town Manhattan, creating an extensive
branch network would be cost prohibitive.
The timing would be tough, too: E*Trade's immediate
priority is integrating Telebank's personnel and
service offerings. Building a branch network while
making its ATMs E*Trade aware might be too much for
even the big e-broker to undertake at this time.
Differentiation strikes. Having an ATM network clearly
gives the firm a leg up on other virtual banks, many
of which have agreements with brick and mortar banks
for use of their ATM networks. For its competitor, a
physical presence carries a heavy cost: many absorb
the fees levied for non-bank customers that use their
partners' ATMs. By acquiring CCS, E*Trade won't have
to worry about this.
E*Trade's ATM network will be of particular interest
to clients seeking a more efficient way of depositing
checks and money orders (and who distrust the U.S.
Post Office as a critical intermediary). This could
help E*Trade convert more online banking prospects
into clients.
The ATM network could also serve another purpose:
fortifying E*Trade's global expansion (which extends
from Japan, the U.K., Sweden, Denmark and France
through Australia, New Zealand, Canada and Korea). CCS
already has a presence in Canada and Mexico. Building
out its presence in countries already waving the
E*Trade brokerage flag will not only help make its
brand more tangible, but give the firm a critical edge
in the roaring battle for the minds, hearts and
pocketbooks of overseas investors.
Services surfeit. Why stop with banking and brokerage
services? CCS' ATMs are deployed at hotels, shopping
malls, grocery stores, convenience stores, gas
stations and entertainment complexes (through
agreements with RiteAid, Safeway, Coastal and
Chevron). Why not provide consumers with ancillary
e-commerce services delivered via Internet-connected
ATMs?
Destination E*Trade already offers a host of products
and services. It wouldn't be much of a leap of faith
to see E*Trade offering clients the ability to
purchase event tickets, e-postage, books, music -- you
name it.
Overall, this deal has a lot of upside for E*Trade and
its clients. E*Trade, however, has its work cut out.
Rationalizing Telebank and CCS with its brokerage
financial services is no trivial matter. Time will
tell if E*Trade has grabbed the integrated financial
services high ground or is grounded by the formidable
technical challenges accompanying such an adventure. |
